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Globe 2012 annual report
financial report
equivalent to the net investment (asset cost) in the lease. All income resulting from the receivable is
included in the “Interest income” account in the consolidated statements of comprehensive income.
Leases where the Globe Group does not transfer substantially all the risk and benefits of ownership of
the assets are classified as operating leases. Initial direct costs incurred in negotiating operating
leases are added to the carrying amount of the leased asset and recognized over the lease term on the
same basis as the rental income. Contingent rents are recognized as revenue in the period in which
they are earned.
2.7.24 General, Selling and Administrative Expenses
General, selling and administrative expenses, except for rent, are charged against current operations as
incurred (see Note 2.7.23.1).
2.7.25 Foreign Currency Transactions
The functional and presentation currency of the Globe Group is the Philippine Peso, except for EHL and
GTIC HK whose functional currency is the Hong Kong Dollar (HKD) and GTIC US whose functional
currency is the USD. Transactions in foreign currencies are initially recorded at the functional currency rate
prevailing at the date of the transaction. Outstanding monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency rate of exchange ruling at the end of reporting period.
Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rate as at the date of the initial transaction and are not subsequently restated. Nonmonetary
items measured at fair value in a foreign currency are translated using the exchange rate at the date when
the fair value was determined. All foreign exchange differences are taken to profit or loss, except where it
relates to equity securities where gains or losses are recognized directly in other OCI.
As at the reporting date, the assets and liabilities of EHL, GTIC US and HK are translated into the
presentation currency of the Globe Group at the rate of exchange prevailing at the end of reporting period
and its profit or loss is translated at the monthly weighted average exchange rates during the year. The
exchange differences arising on the translation are taken directly to a separate component of equity under
“Other reserves” account. Upon disposal of EHL, GTIC US and HK, the cumulative translation adjustments
shall be recognized in profit or loss.
2.7.26 EPS
Basic EPS is computed by dividing net income attributable to common stock by the weighted average
number of common shares outstanding, after giving retroactive effect for any stock dividends, stock splits or
reverse stock splits during the period.
Diluted EPS is computed by dividing net income by the weighted average number of common shares
outstanding during the period, after giving retroactive effect for any stock dividends, stock splits or reverse
stock splits during the period, and adjusted for the effect of dilutive options and dilutive convertible preferred
shares. Outstanding stock options will have a dilutive effect under the treasury stock method only when the
average market price of the underlying common share during the period exceeds the exercise price of the
option. If the required dividends to be declared on convertible preferred shares divided by the number of
equivalent common shares, assuming such shares are converted, would decrease the basic EPS, then
such convertible preferred shares would be deemed dilutive. Where the effect of the assumed conversion
of the preferred shares and the exercise of all outstanding options have anti-dilutive effect, basic and diluted
EPS are stated at the same amount.
2.7.27 Operating Segment
The Globe Group’s major operating business units are the basis upon which the Globe Group reports its
primary segment information. The Globe Group’s business segments consist of: (1) mobile communication
services; (2) wireline communication services; and (3) others. The Globe Group generally accounts for
intersegment revenues and expenses at agreed transfer prices.
2.7.28 Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. These are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets
are not recognized in the consolidated financial statements but are disclosed when an inflow of economic
benefits is probable.
2.7.29 Events after the Reporting Period
Any post period-end event up to the date of approval of the BOD of the consolidated financial statements
that provides additional information about the Globe Group’s position at the end of reporting period
(adjusting event) is reflected in the consolidated financial statements. Any post period-end event that is not
an adjusting event is disclosed in the consolidated financial statements when material.
3. Management’s Significant Accounting Judgments and Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with PFRS requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. The estimates and assumptions used in the accompanying consolidated
financial statements are based upon management’s evaluation of relevant facts and circumstances as of the
date of the consolidated financial statements. Actual results could differ from such estimates.
Judgments and estimates are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
3.1 Judgments
3.1.1 Leases
3.1.1.1 Operating lease commitments as lessor
The Group has entered into a lease agreements as a lessor. Critical judgment was exercised by
management to distinguish the lease agreement as either an operating or finance lease by looking at
the transfer or retention of significant risk and rewards of ownership of the properties covered by the
agreements. The Group has determined that it retains all the significant risks and rewards of
ownership of the properties and so accounts for the agreement as an operating lease
(see Note 25.1.1).
3.1.1.2 Operating lease commitments as lessee
The Group has entered into various lease agreements as a lessee where it has determined that the
lessors retain all the significant risks and rewards of ownership of the properties and, as such,
accounts for the agreements as operating lease (see Note 25.1.1).
3.1.1.3 Finance lease
The Globe Group has entered into a finance lease agreement related to hardware infrastructure and
information equipment. They have determined, based on the evaluation of the terms and conditions of
the arrangement, that they bear substantially all the risks and rewards incidental to ownership of the
said machineries and equipment and so account for the contracts as finance leases (see note 25.1.2).
3.1.2 Fair value of financial instruments
When the fair value of financial assets and financial liabilities recorded in the consolidated statement of
financial position cannot be derived from active markets, their fair value is determined using valuation
techniques including the discounted cash flow model. The inputs to these models are taken from
observable markets where possible, but where this is not feasible, a degree of judgment is required in
establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk
and volatility. Changes in assumptions about these factors could affect the reported fair value of financial
instruments.
3.1.3 Financial assets not quoted in an active market
The Globe Group classifies financial assets by evaluating, among others, whether the asset is quoted or not
in an active market. Included in the evaluation on whether a financial asset is quoted in an active market is
the determination on whether quoted prices are readily and regularly available, and whether those prices
represent actual and regularly occurring market transactions on an arm’s-length basis.
3.1.4 Allocation of goodwill to cash-generating units
The Globe Group allocated the carrying amount of goodwill to the mobile content and application
development services business CGU, for the Group believes that this CGU represents the lowest level
within the Globe Group at which the goodwill is monitored for internal management reporting purposes; and
not larger than an operating segment determined in accordance with PFRS 8.
3.1.5 Determination of whether the Globe Group is acting as a principal or an agent
The Globe Group assesses its revenue arrangements against the following criteria to determine whether it
is acting as a principal or an agent:
whether the Globe Group has primary responsibility for providing the goods and services;
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